16 May Reply 2.3
Part of the strategic formulation is to conduct an external audit, or an environmental scan, which will help identify and evaluate trends and events beyond the control of an organization, otherwise considered threats or opportunities (David & David, 2017). Although it’s usually considered more difficult to evaluate, an external audit points out the important opportunities and threats that comes in front of an organization, thereby allowing management to develop proper strategies to face them head on.
An external assessment consists of factors such as economic forces, social, cultural, and demographic forces, political and legal forces, technological forces, and competitive forces. The best way to tackle them is to evaluate some key sources of information for each:
- economic – includes interest rates, unemployment levels, inflation, tax rates, and worker productivity
- social, cultural, and demographic – analyze changes in these areas as they affect product and pricing strategies
- political and legal – ensure compliance with current regulations by consulting with regulatory compliance team
- technological – advancements are on a dynamic basis and capitalizing on an online presence may improve product quality or render current methods obsolete
- competitive – monitor the competition’s strategies through price changes, customer feedback, and using competitive intelligence (David & David, 2017)
Reference
David, F. R. & David, F. R. (2017). Strategic Management: A Competitive Advantage Approach, Concepts and Cases, 16th edition. Prentice Hall.
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